Three policies, one leak: which pays first?

Water has leaked in from above through the bathroom and bedroom ceilings, the paint is blistering and the laminate floor has buckled. There is one loss – but three policies that may come into play: your own home insurance, the condominium's policy and the liability section of the upstairs neighbour's home insurance. For many people there is a fourth as well: an inherited policy, or an old one taken out for a mortgage, which has been running in parallel with their own for years. Two questions arise at this point: which one to turn to first, and – if three insurers would all pay – whether the loss is paid three times. As a broker, what I see is that anyone who has understood the order once copes more calmly with the next leak – and also notices sooner a second premium they are paying for nothing.

In short:

One loss, three legal grounds: your own home insurance and the building's policy are property insurance, while the neighbour's is liability insurance – and the latter pays only if the neighbour is legally liable for the damage.
Insurance compensates a loss; it does not produce a profit: under the multiple-insurance rule of the Hungarian Civil Code (Ptk.), you may claim from one or more insurers, but in total you cannot receive more than your actual loss – the insurers settle accounts among themselves.
In practice, your own home insurer is the obvious first port of call, because you do not have to wait for the neighbour's liability to be established; the insurer can then recover the amount paid from the party who caused the damage under Section 6:468 of the Ptk.

One loss, three different legal grounds

The three contracts do not serve the same purpose, even if all three seem to pay ‘for the leak’. Your own home insurance is property insurance: in line with the policy conditions, it pays for damage to the building elements and contents of your own flat – typically under the escape-of-water or water-ingress cover, with the deductible, limits and depreciation rules set out there. The building's policy is also property insurance, but it covers the common property – the risers, the roof, the floor slabs; whether it also extends to building elements inside the flats differs from building to building and from one set of conditions to another, as the article on where home insurance ends and condominium insurance begins explains in detail. The liability section of the neighbour's contract, on the other hand, is liability insurance: under the liability insurance rules of the Hungarian Civil Code (Ptk.), Section 6:470 et seq., the insurer relieves the insured person of paying compensation for damage for which they are liable under the law. This is the key sentence: the neighbour's liability insurer does not pay because you have suffered a loss, but because the neighbour is liable for it – the damage can be traced back to conduct for which the neighbour is at fault, for example a neglected, dripping connection. If the water came from a shared riser or from the roof, the neighbour did not cause the damage, and their liability insurance does not come into play at all.

So the first practical rule is this: look not at the number of policies but at where the damage originated and who is liable for it. The neighbour's own pipe or appliance: the neighbour's liability. A commonly owned pipe, roof or floor slab: a matter for the building, where the escape-of-water or building liability cover on its policy typically applies. In both cases your own home insurance covers your loss – which is exactly why it is, in most cases, the obvious first port of call.

Which one to turn to first – and why?

It is worth turning to your own home insurer first because property insurance does not ask who is at fault: if the leak is an insured event under your contract, the insurer pays in line with the policy conditions, and you do not have to establish where the damage came from or whether the neighbour is liable, nor wait for the outcome of a dispute with them – on the liability route you would have to prove the source of the damage, and the neighbour would escape liability only by proving that they were not at fault. Up to the amount paid, the insurer then has a recourse claim against the party who caused the damage under Section 6:468 of the Ptk. – this is recourse (regressz), which the article on recourse describes from the point of view of the party who caused the damage. In that case the neighbour reports the claim to their own liability insurer, and if their liability is established, that insurer settles it. What remains for you is whatever your own contract did not cover: the deductible, the deduction for depreciation, the part above the limit. You can claim this remainder directly from the party who caused the damage, because under the Ptk. they must compensate the injured party's entire loss – the liability insurer, however, pays only up to the limit and on the terms of its own contract, so if the neighbour's cover is narrow, the difference stays with the neighbour. If your own insurer pursues its recourse claim in court, under Section 6:468 of the Ptk. it must inform you of this and, at your request – provided you advance the costs – must also pursue your remaining claim; if the damages awarded do not cover everything, your claim takes priority.

At the liability insurer, you are not the customer. Under the liability insurance rules of the Ptk., the insurer pays the compensation to the injured party, but the injured party pursues the claim against the party who caused the damage, and the insurer examines liability on the side of its own insured. This requires the neighbour's cooperation: it is the neighbour who must report the event to their own insurer, and the neighbour who must answer the insurer's questions. If they do not, or have no insurance at all, your own home insurance remains your fixed point – this is the main argument for not sizing your own water-damage cover on the policies your neighbours are likely to have. Turn to the building's policy if the damage originates from a commonly owned structure: there, reporting the claim is typically the job of the condominium manager (közös képviselő); inform your own insurer and the manager at the same time. The article on the liability claims process after a leak gives step-by-step guidance on how things proceed between the three parties.

Not paid three times: the multiple-insurance rule

The basic principle of indemnity insurance is that it compensates the loss and does not pay out more than the loss. Among the indemnity insurance rules of the Ptk. there is a separate provision on multiple insurance (Section 6:459): if the same interest is insured independently by several insurers, the insured person may submit their claim to one or more of them; the insurer approached pays according to its own conditions and up to its own sum insured, has a proportionate recourse claim against the other insurers, and the insurers bear the loss paid proportionately among themselves. In plain terms: you report the loss in one place, you receive the compensation once, and the insurers settle up among themselves. Collecting the same loss twice or three times is not possible: Section 6:459 of the Ptk. allows you to submit the claim to several insurers, not to be compensated twice. Anyone who conceals another insurer's payment when reporting a claim is providing false information – any amount received over and above the loss must be repaid, and deliberate concealment may constitute insurance fraud.

The same rule governs the overlap between the building's policy and your own home insurance if the building's insurance also extends to building elements inside the flat: repainting the ceiling is paid for once, by one insurer, not by two. Which one pays depends in practice on where the claim was reported and what each set of conditions treats as an insured event – the difference shows mostly in the deductible and the depreciation; the insurers settle the proportions among themselves.

Two home insurance policies on the same flat: the premium that is wasted

The inherited policy that nobody cancelled after the estate was settled; the old policy taken out at the bank's request that is still being paid after the loan has run its course; the old one kept ‘just to be on the safe side’ alongside a new, broader contract – each is a second property insurance covering the same interest. In the event of a loss, the second contract does not bring a second payout, so the second premium typically goes to waste. Only a difference in content can give it a purpose: if one contract covers only the building and the other only the contents, that is not an overlap but a complement – this is worth checking item by item on the policies. If both insure the same building and the same contents, the logical step is to keep the better one and cancel the other properly: at least 30 days before the renewal date, and for residential property also in March of each year. The question of value is explored in the article on overinsurance: two sums insured added together still do not pay more than the actual loss. Two more things are worth knowing: Hungarian policy conditions typically require the policyholder to disclose if they also have a contract with another insurer for the same property, and the insurer may also ask about this when a claim is made; and an old contract linked to a loan may carry the bank's mortgagee clause, so while the loan is still running the bank must be notified before cancelling, and the clause must be recorded on the new policy.

What should you do at the next leak?

First, mitigate the damage: stop the water – the main stopcock at the neighbour's, a message to the condominium manager if a shared pipe is suspected – then take time-stamped photos of the ceiling, the floor and the likely source of the damage. Next, report the loss on your own insurer's claims line and say that the damage probably comes from the flat above or from a shared pipe: this is needed for the later recourse claim. Ask the neighbour to report the event to their own insurer as well, and put in writing together when and what happened. Do not sign any statement waiving your further claims until your own insurer has paid and you can see how much is left over. If you have several contracts, get them all out now: of those that cover the same thing, keep only one. If the claim gets stuck or the two insurers point at each other, I act on the client's behalf and help where I can – but the primary route for reporting a claim is the insurer's claims line, and that is where the case starts.

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Sources

This article is for information purposes only; it contains general information and does not constitute an offer or insurance advice. The exact content of insurance contracts is defined by the insurers' terms and conditions in force. The question of liability and the settlement between insurers are decided by the circumstances of the particular case and the policy conditions; in a disputed case, legal advice may be warranted.

Three policies could pay for the same leak – can I claim on all three?

One loss, three different legal grounds

Which one to turn to first – and why?

Not paid three times: the multiple-insurance rule

Two home insurance policies on the same flat: the premium that is wasted

What should you do at the next leak?

Sources

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